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New California Labor and Employment Laws for 2003

December 31, 2002

California labor and employment law will see significant changes beginning January 1, 2003. As has been the state's trend, many of these new laws expand employee rights and protections, and require employers to reexamine their policies and meet tougher standards in such areas as employee benefits, discrimination, privacy rights and injury reporting. Also effective January 1, 2003, California employers must display a revised Workers' Compensation poster and distribute new pamphlets to employees. The legal changes and posting requirements are summarized below.

New California "WARN" Statute -- Workers Must Receive Notice Of Layoffs

California's new Worker Adjustment and Retraining Notification ("WARN") Act requires employers in any industrial or commercial facility with 75 or more employees to give 60 days' notice of any mass layoff, relocation or termination affecting 50 or more employees. Written notice must be provided to affected employees, the Employment Development Department, the local workforce investment board and certain elected officials.

For the purposes of this law, an "employee" is a person employed for at least 6 of the 12 months preceding the notice date; a "mass layoff" is a layoff during a 30-day period of 50 or more employees; a "relocation" is the removal of substantially all of the employer's industrial or commercial operations to a location 100 miles or more away; and a "termination" is the closing of the employer's industrial or commercial operations.

Employers are not required to comply with the notice requirements in the event of a physical calamity or act of war. Additionally, when facing termination or relocation, employers are not required to comply if both of the following are true:

California employers must also comply with federal notice requirements regarding layoffs, closure and relocation.

Employers Must Make Training Programs, Fringe Benefits, Available To Employees Age 40 And Older

California's Fair Employment and Housing Act ("FEHA") protects people age 40 and older from discrimination in the workplace but, prior to January 1, 2003, it did not prohibit age discrimination in the selection of employees for training and fringe benefits. In July 2002, the California Supreme Court confirmed this interpretation of FEHA in Esberg v. Union Oil Co. of California, ruling that employers may consider age when providing benefits such as tuition assistance.

Under the new law, however, employers are required to offer benefits to employees age 40 and older to the same extent as to all other employees. Specifically, employers must not use age as a basis for excluding or removing employees from a training program, or for discriminating against a person in compensation, terms, conditions or privileges of employment.

All California businesses with 5 or more employees are covered by this law. Moreover, employers may face severe penalties for violations, including liquidated and compensatory damages, court costs and attorney's fees.

Employers Cannot Use Kin Care As A Basis For Employee Discipline

California law requires employers who provide paid sick leave to permit employees to use one-half of this time to care for an ill child, parent, spouse or domestic partner.

The new law forbids employers from counting sick leave used to attend to a seriously ill family member or domestic partner as a basis for employee discipline or other adverse employment action.

New Standards For Background Checks And Investigations

Under the prior version of California's Investigative Consumer Reporting Agencies Act ("ICRAA"), employers were required to automatically furnish a copy of any investigative report to the affected employee or applicant. The new requirements are as follows:

Background Checks: Employers using outside agencies to conduct background checks must comply with ICRAA by giving notice to the applicant or employee and by receiving prior authorization for the check.

Employers using an agency are not automatically required to furnish the report unless the individual makes a request. This request may be indicated on a consent or notice form provided by the employer. If the applicant or employee requests the report, the employer must provide it within 3 business days.

Internal Investigations: Employers conducting their own investigations are not required to furnish to the affected employee any records obtained unless the records are public (e.g., criminal and DMV reports). In this case, the individual must receive the records within 7 days of the employer's receipt unless:

¨ the employer suspects misconduct or wrongdoing, in which case the employer may withhold the report until it completes its investigation, or;

¨ the employee or applicant has waived his or her right to receive the records.

However, if the employer takes any adverse action on the basis of its investigation, the individual must receive a copy of the report regardless of any waiver.

Additionally, when an employer acquires information from any source regarding an applicant or employee's character, reputation, or mode of living, that information must be provided to the applicant or employee.

Reference Checks: Employers conducting their own reference checks are not required to provide applicants with the information they acquire unless the employer obtains public records. Therefore, references from previous employers may remain confidential.

Comments Made By Former Employers: The ICRAA amendments reinforce that employers have qualified immunity from slander and libel suits for comments made regarding an employee's job performance or skills. Such comments must be made without malice and be based upon credible evidence for immunity to apply. The qualified immunity also covers employers responding to inquiries regarding whether or not they would rehire a particular employee.

Immigration Status Irrelevant When Enforcing California Labor And Employment Laws

This statute is intended to protect the rights of undocumented workers in the wake of the U.S. Supreme Court's ruling in Hoffman Plastic Compounds Inc., v. NLRB, 535 U.S. 137 (2002). In that case, an undocumented worker presented false documents to the employer seemingly verifying his authorization to work in the United States. During his employment, the worker filed a charge against his employer for a violation of the National Labor Relations Act and received an award of back pay. The Supreme Court ruled that immigration policy prohibited such an award to an undocumented alien.

The new law provides that all individuals who are employed or have applied for employment in California, regardless of immigration status, are protected by the rights and remedies available under the state labor, employment, civil, government and health and safety laws.

Employers are thus reminded to carefully verify the eligibility of each employee to work in the United States in accordance with the Immigration Reform and Control Act of 1986 ("IRCA"). The employer must complete INS Form I-9 and should examine documents that establish the employee's identity and eligibility to work in the U.S. before completing this form. This examination should be made subsequent to the hiring decision to avoid violating IRCA's anti-discrimination provisions .

Civil Remedies For Gender-Based Violence And Threats

This law establishes civil liability for gender-based violence and threats of violence. Although the law does not impose liability on employers, managers and supervisors will be subject to suit. Liability may include actual, compensatory and punitive damages as well as attorney's fees and costs.

California Expands Time To Bring Law Suits For Personal Injuries And Shortens Time For Employers To Build Their Legal Defense

California employees will now have twice as long to file personal injury lawsuits. Previous law provided a one year statute of limitations for personal injury claims such as intentional infliction of emotional distress, wrongful termination in violation of public policy, and defamation. The new law extends the statute to two years and is retroactive for claims stemming from the September 11, 2001 terrorist attacks. In such cases, civil claims of personal injury must be filed by September 11, 2003.

Employers are further impacted by the procedural aspects of this law because they will have less time to build their legal defense. Previously, when preparing a summary judgment motion, defendants were required to provide 28 days' notice to plaintiffs before filing. The new law extends this notice period from 28 to 75 days, thus reducing the time employers will have to conduct discovery and prepare for trial.

Employers Face Increased Penalties For Failure To Report Injuries, Death

California law requires employers to report every death or serious injury in the workplace to the California Occupational Safety and Health Administration.

The new law increases the penalties for an employer's failure to report these occurrences. The minimum fine is now $5,000 and could be as high as $150,000 for corporations and limited liability corporations.

Expansion Of COBRA Benefits

Effective September 1, 2003, qualified beneficiaries who begin receiving COBRA continuation coverage on or after January 1, 2003, and who exhaust such coverage, must be given the option to extend their coverage to a total of 36 months.

Consumers, Employees Must Receive Notice Of Security Breach

These laws are designed to address some of the privacy concerns that are arising as the collection of personal information becomes increasingly widespread by way of the internet and other technological advances.

All California businesses that own or license computerized data encompassing personal information (e.g., name coupled with credit card number, social security number or drivers license number) must notify any affected California resident of a security breach.

California Extends Workplace Protection To Sexual Assault Victims

Sexual assault victims will receive the same employment protections and leave of absence rights as those currently offered to domestic violence victims.

California law prohibits employers from taking adverse action against domestic violence victims who take time off from work as a result of the violence. The new law extends the same protections to sexual assault victims. Therefore, employers must permit victims of either domestic violence or sexual assault to take time off from work to attend to issues related to the violence and must not discriminate against or terminate employees for using such time.

Employers should seek legal advice when dealing with any employee who is the victim of a crime to ensure they are providing all rights afforded under the law.

California Extends Protection To Employees Who Reveal Poor Working Conditions

Current law protects employees from discipline, termination and discrimination in job advancement for disclosing the amount of their wages.

This bill expands these protections to cover an employee's right to disclose information regarding working conditions. However, there are exceptions in place for proprietary, trade secret and other information that is subject to a legal privilege.

Employers should review their confidentiality agreements to ensure that those agreements do not contain clauses requiring employees not to reveal the amount of their wages or conditions in the workplace.

Employers Must Permit Inspection Of Payroll Records Within 21 Days Of Request

This bill requires employers to permit inspection of payroll records within 21 days of a request from a current or former employee. The law imposes a $750 penalty for failure to comply, and gives the employee the right to sue for injunctive relief to obtain access to the records.

California Increases Minimum Wage For Certain Computer And Health Professionals

On January 1, 2003, the minimum wage for exempt professional computer software employees will increase 2.2 percent, from $42.64 to $43.58 per hour. Additionally, the minimum hourly wage for certain exempt licensed physicians and surgeons will increase from $55.00 to $56.21.

The generally applicable minimum hourly wage under California law remains unchanged at $6.75.

California Employers Must Display Revised Worker's Compensation Poster

Amendments to the worker's compensation law provide for increases in benefits over the next four years and require employers to display a revised poster and distribute a new pamphlet to employees.

Employers can obtain required posters and pamphlets by contacting either of the following:

Poster Distribution Center
Department of Industrial Relations
Public Information Office
P.O. Box 420603
San Francisco, CA 94142-0603

California Chamber of Commerce
3255 Ramos Circle
Sacramento, CA 95827
(800) 331-8877

Family Temporary Disability Insurance Program To Take Effect In 2004

On January 1, 2004, California will become the first state in the nation to mandate paid family leave. The law will provide disability compensation for employees who are unable to work due to the sickness or injury of a family member or domestic partner, or the birth, adoption, or foster care placement of a new child. The law applies to leaves of absence that commence on or after July 1, 2004. FTDI does not provide benefits for an employee's own serious medical condition (in which case other wage replacement benefits, such as disability insurance or workers compensation benefits, are often available).

The law provides eligible employees approximately 55 percent of their wages, up to a maximum of $728 per week for up to six weeks in a 12-month period. Benefits will not be paid by employers but, rather, will be funded by employee payroll deductions similar to state disability insurance. Employers will be required to deduct the FTDI contributions from the wages of employees who are covered by the program.

FTDI applies to all private employers, regardless of size. And, while only employees with at least one year of service are eligible for leave under current family and medical leave laws, the new law contains no such eligibility requirement. Thus, an employee could request FTDI leave his first day on the job if he had been paying into the program. However, employers with fewer than 50 employees are not required to hold an employee's job open during the leave period. Additionally, employees can be required to use up to 2 weeks of accrued vacation time before receiving FTDI benefits.